Denver Diversity: inclusionary housing ordinances

There’s old adage that you can measure an economy by the number of construction cranes in the sky. Denver’s skyline is crowded these days, as are our transit stops and business districts with new stations, restaurants, and retail. But as housing prices have skyrocketed along with this growth, incomes have not, and the unintended consequence is a growing housing pinch for moderate-income families who are having a harder time achieving the American Dream of homeownership. We value cities for their diversity and the vibrancy that comes with a mix of incomes and backgrounds, but market forces threaten to make Denver affordable only for high earning families.

Programs like Denver’s Inclusionary Housing Ordinance (IHO) balance affordability with wealth creation, and aims to expand the number of affordable homes available. The IHO, originally passed in 2002, requires for-sale housing developments of more than 30 units to make 10% of their homes affordable to families earning between $42,950 and $61,350 annually (family size of 1 to 4). This might be your head start teacher, entry level nurse, or 9-1-1 dispatcher. As just one piece of Denver’s overall affordable housing strategy, we have separate efforts for low-income and homeless housing, I have been working with a broad coalition of stakeholders to revise the IHO so it will create more homes for families.

In 2013, City Council approved a first round of amendments to add flexibility for owners of affordable homes. Guided by an economic study of Denver’s housing needs and national best practices, the next amendments will recalibrate the developer requirements to help build more homes and work in closer partnership with them.

While the current ordinance has created some affordable homes, most have been built because of large development agreements such as those in Stapleton, Green Valley Ranch, and Lowry. Very few homes have been built in higher costs areas, like downtown and central Denver. In these higher-cost, higher-need areas, developers have largely chosen to pay “cash in lieu” of building affordable homes. Denver uses those cash payments to pay other developers who do build their units a modest $5,500/per home cash incentive, or invests the funds directly in mixed-income affordable housing developments.

Revised Ordinance:

An enhanced culture of flexibility, providing developers more options to create different size, type or affordability of homes on-site, or even off-site through partnerships with other developers. Most cities have a larger array of incentives available to help developers absorb the economics of providing affordable homes than Denver does, so flexibility is intended to increase the chances for real homes to be built rather than paying cash. To foster creative partnerships and “outside the box” solutions to Denver’s housing needs, an independent advisor would provide technical assistance and support for developers to explore these options.

Variable incentives/cash in lieu levels to mirror the variation in housing prices across Denver’s neighborhoods. The requirement to build 10% of homes as affordable in medium to large for-sale development projects will remain the same in the new ordinance. But the incentive payments or cash in lieu amounts will change based on the “zone” where the project is located.

Sixty percent of Denver neighborhoods are identified as “medium” zones and will see virtually no change. It will cost developers the exact same to pay cash in lieu, and they will receive about the same if they build the affordable homes.

Using median home prices and proximity to transit to identify higher-cost, higher-need neighborhoods where the cost of building affordable homes might be higher and therefore less likely, approximately 15% of the city has been identified as a “high” zone. In these “high” areas, the revised ordinance will more strongly encourage building of homes by raising the amount of cash a developer has to pay if they opt not to build affordable homes, while at the same time providing a much higher incentive of $20,000 per unit.

Areas where home prices are lowest and there is little transit access, about 25% of the city, will be in a “low” zone where the ordinance lowers both the amount of cash in lieu fees and incentives, simply allowing market forces to play a greater role in determining which choice a developer makes.

Together we can keep Denver diverse for a mix of incomes.

Final Public Meeting:

Tuesday, July 15th from 6:00-7:30pm at the Blair Caldwell Library, 2401 Welton Street. Spanish translation will be available. For more info contact kniechatlarge@denvergov.org or 720-337-7712.